From the January 22, 2009 European Voice
January 22, 2009
by Rod Hunter
With the world economy sputtering and global trade talks stalled, President Barack Obama and his European counterparts should leverage the transatlantic market to initiate a new cycle of global integration.
Obama's predecessors and their European counterparts have constructed a useful structure for co-operation: the Transatlantic Economic Council (TEC), which brings together US cabinet officers and European commissioners.
Over the past 18 months, the TEC has made incremental progress, notably on accounting standards and regulatory policy. The TEC has also provided a platform for discussing global concerns, such as consumer safety in globalised markets and China's mercantilism.
The transatlantic market remains central to the global economy. Yet, barriers mar the transatlantic market and stunt growth. While tariffs are generally low (about 3%), the combined effect of tariff and non-tariff barriers equates to an average tariff rate of about 7% for the US and 10% for the EU, according to the World Bank.
The times call for grander ambition for the transatlantic market and its role in the world. Here is a three-part agenda for moving forward.
1. Resolve legacy trade cases. Washington and Brussels should start by clearing the deck of World Trade Organization (WTO) litigation, which would provide momentum for a forward-looking agenda:
First, they should press Airbus and Boeing to resolve their commercial dispute. This subsidy dispute, in which neither side is immaculate, will ultimately come down to some form of negotiation, even if one lets the litigation run its course.
Second, the governments should negotiate a comprehensive deal resolving the other WTO cases relating to bananas, beef hormones, biotech crops, Cuba sanctions, and intellectual property and trade remedies. Each side's punitive tariffs could be replaced with increased access to the other's market.
2. Tackle trade and investment obstacles while increasing security. The governments should embrace a more ambitious TEC work programme.
In areas where regulatory policies are evolving, the two sides should work to develop compatible approaches. Financial market, nanotechnology and climate regulations would be good candidates. Where regulation is in place, they should work towards mutual recognition of each other's approval regimes, so that products do not require duplicative certifications to be sold on both sides of the Atlantic.
The two sides should apply the same approach to trade and transport security, where governments (especially the US's) have been adding burdens to movements of goods and people. Extending a common security perimeter around the transatlantic space would increase security while cutting costs.
3. Initiate a new liberalisation dynamic. The US and EU should catalyse a new global liberalisation dynamic with a free-trade agreement open to other countries that meet its terms. Such an accord could eliminate tariffs on goods and liberalise investment and services, which make up 70% of advanced economies but are barely touched by the WTO.
This agreement would use the improved access to the transatlantic market to create a highest-common-denominator trading regime within the WTO system. Countries that wanted to participate in deeper liberalisation could do so. The less ambitious could content themselves with the basic WTO obligations.
The US and EU should also press for completion of the Doha round, which would remain essential for achieving farm-subsidy cuts. An ambitious US-EU agenda could drive reform bilaterally and leverage access to the transatlantic market to instigate a new round of global integration.
Rod Hunter is a senior fellow at the Hudson Institute and a former senior director of the White House's National Security Council, where he co-ordinated the Transatlantic Economic Council for the George W. Bush administration.
Rod Hunter, a senior fellow with Hudson Institute, served as senior director at the National Security Council under President George W. Bush
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